NATURAL GAS Severe winter will send prices up

Supplies leave little room for a big demand.
WASHINGTON (AP) -- Natural gas supplies have rebounded because of a cool summer that lowered demand, but consumers will still see higher fuel costs this winter, an Energy Department official said Wednesday.
Prices could rise sharply if the weather turns unusually cold, said Guy Caruso, head of the department's Energy Information Administration.
Industry likes to have about 3 trillion cubic feet of gas in "working storage" when winter approaches, and "we're now on the path to meet average storage levels by November," Caruso told an energy conference.
Storage levels were so low last spring that there was concern that the target could not be met, especially if summer electricity demand caused high use of natural gas by utilities.
Little wiggle room
Caruso emphasized that gas supplies remain tight with little room for a jump in demand if the upcoming winter turns especially cold.
"A small change could mean a large increase in price," he cautioned in an interview. "I don't want to be overly optimistic."
Caruso estimated that if there is a normal winter -- one less severe than last winter -- the average residential heating cost will be $60 to $70 higher than last year, or about $864 for the heating season. That amounts to about $9.45 cents per thousand cubic feet of gas used.
As of last week there were 2.486 trillion cubic feet of gas in storage, close to the five-year national average for this time of year. Last May, storage levels were the lowest ever recorded for the start of summer, nearly 40 percent below the five-year average, and there was concern about gas supplies for the upcoming winter.
Bigger news
Worries about a natural gas crunch were overshadowed in recent months by concerns about soaring summer gasoline prices and the reliability of the nation's electricity grid after the Aug. 14 blackout that hit across most or parts of eight states from Michigan to New York.
Government officials and industry executives remain worried about the tight natural gas market with little sign of increased production over the long term and steadily growing demand, especially by utilities that have been relying increasingly on natural gas to produce power.
But the short-term crisis atmosphere concerning this winter's gas supplies appears to have eased.
"We feel pretty good about the storage situation right now," said Roger Cooper, an executive vice president at the American Gas Association, which represents natural gas utilities.
Nevertheless, consumers relying on natural gas to heat their homes and industries using large amounts of gas will see little easing of prices.
The EIA estimated that the price of gas at the wellhead -- the cost of the gas itself, excluding transmission and distribution charges -- which was more $6 a thousand cubic feet last spring, would range from between $4.80 to $5.50 this winter.
Spot price
The Henry Hub spot price for gas, which represents gas sales contracted for next-day delivery, has eased in recent weeks, closing Tuesday at $4.64 a thousand cubic feet.
Caruso said that this summer's temperatures were 11 percent cooler than normal. That, along with high gas prices exceeding $5 per thousand cubic feet for much of the year, caused a drop in demand from utilities and industrial users.